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Les Mills International Club Owner CVM Report. February 2008. CVM Overview. Image & Reputation. Les Mills business processes. Customer view. Customer process. Les Mills process. Customer Value Management (CVM). Customer process. Les Mills process. Products & Services. Customer process.

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slide3

Image & Reputation

Les Mills business processes

Customer view

Customer process

Les Mills process

Customer Value Management(CVM)

Customer process

Les Millsprocess

Products & Services

Customer process

Les Millsprocess

Les Millsprocess

Customer process

Prices & Costs

Les Millsprocess

Customer process

Les Millsprocess

Customer Value Management is based on customer trade offs between what they get and how much they pay, organised around customer facing processes and linked to internal business processes so pragmatic changes can be implemented

slide4

The link with business processes is vital as these processes are the levers that managers can use to change customer perceptions of value and ultimately impact EBIT

Business processes…(across LMI and its agents)

…influence customer perceptions of Les Mills performance…

…to provide clarity as to where Les Mills can focus its business improvement efforts and quantify what's at stake…

…which are modelled…

HR

  • Recruiting, retaining and training the right people

e.g. Initiative: Improve Programme Quality

Operations

  • Training

Finance

  • Billing
  • Direct Financial Impact
  • Cost of project
  • Revenue gain
  • Indirect Financial Impact
  • Impact on customer perceptions which impacts share of wallet

Sales and Marketing

  • Communicating the value proposition of the Les Mills programmes effectively

Customer Service

  • Providing the required level of service to the customers

EBIT Impact

slide5

Illustrative

We also know that what is important to customers can vary across their lifecycle so we also measure the key decision criteria customers use when deciding to spend on Les Mills programmes

Performance on Key Decision Criteria determine likelihood to spend with Les Mills

High

Level of consideration given to selection / changing Group Fitness Provider

Customer perceptions (as shown by CVM) determine likelihood to change spend levels

e.g. Renegotiation of contract, bad service experience, new entrant in the market

New Relationship

Trigger Point

Trigger Point

Low

Time

slide6
A Customer Value Model has three key metrics which each serve a purpose in understanding perceptions of performance

Image and Reputation

xx% x.x ± xx

1

Absolute performance

1=poor, 10=excellent

CVM is a measure of the markets perceptions – as a result CVM scores take time to move as perceptions lag actions and therefore slowly change over time

CVM

x.x ±xx

Products and Services

xx% x.x ± xx

2

Change relative to 2004 survey

3

Level of impact of driver

0-100%

Prices and Costs

xx% x.x ± xx

Impact weights vary by CVM model and by competitor

there are a few things that need to be borne in mind when considering the results of a cvm survey
There are a few things that need to be borne in mind when considering the results of a CVM survey
slide8

In addition to the customer value data, we collected data on key decision criteria, other business issues and information about the customers’ businesses as part of the survey

Key Decision Criteria

Other Business Issues

Other Business Information

  • The five factors (rated in importance) which the customer considered in buying the Les Mills programmes initially
  • Likelihood to reduce usage of Les Mills programmes in the next twelve months
  • Customer views on who the main competition for Les Mills programmes are in each market
  • Customer views on performance of main competition identified
  • eClub usefulness
  • Advanced Instructor Training usefulness
  • Scorecard usefulness
  • BODYPUMP™weight attributes
  • Number of Les Mills programmes
  • Length of time using Les Mills programmes
  • Proportion of timetable devoted to Les Mills programmes
  • Number of members within the club
  • Size of Group Fitness facilities in the club
  • Attendance
  • Internet connections of clubs
slide9

The purpose of collecting this information is to form action plans to maximise profitability across the lifecycle, which because of the supply chain for Les Mills programmes, are undertaken by either LMI and / or the agent

Les Mills CVM Action Framework

Actions that need to be carried out across all markets e.g. addressing programme quality issues

Actions that need to be carried out on a market by market basis but are common across markets e.g. addressing price issues

Global

Scope of Action

Actions that can only be carried out by LMI to address a particular issue in market e.g. change to programme content to address individual market issue

Actions that need to be carried out to address issues particular to individual markets e.g. addressing billing issues

Local

LMI

Agents

Implementation of Actions

slide10

Response rates from the clubs were good enabling detailed information to be provided for seven markets – Australia, Brazil, France, Germany, the Netherlands, Baltic and U.S.A. – and indicative results for Japan

The Netherlands 83 responses

Baltic 92 responses

Germany

59 responses

Total Sample = 649

China 1 response

France74 responses

Japan 19 responses

USA 151 responses

Brazil88 responses

Spain2 responses

Australia81 responses

The United States did not participate in the last CVM study and as a result this sample is different to the last study and this will influence the results shown

slide13

USA

The USA is very sensitive to prices and costs, evenly split between financial and non-financial costs, but performance on these drivers outperforms other markets

Insights and Implications

  • Although relatively lower than other measures, Les Mills is rated higher in the USA on both financial and non-financial costs
  • Actions on non-financial costs should focus on how the convenience of workshops can be improved
  • Actions on financial costs should aim to remove focus on prices and costs and put it on the programs
  • Within the US market Les Mills programs have a very strong reputation for being technical and leading edge which should be reinforced through marketing as it is a high impact driver
  • People are also important and are perceived as a positive with strong performance particularly for proactive contact, being fair, likeable and credible and respecting the customer as valued
slide14

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

The US is the strongest performing country with all aspects significantly higher than the market average

Overall CVM Performance(1)

Insights and Implications

  • Overall perceived value is high at 8.0
  • The US is price sensitive with two thirds of perceived value accounted for by prices and costs with relatively high performance at 7.4
  • The remainder of perceived value is split between image and reputation and products and services both of which are performing extremely strongly

Image and Reputation

Perceived value ofLes Mills products to clubs

Perceived value of the Les Mills system to clubs

Perceived value of the Les Mills systems to clubs

Products and Services

Prices and Costs

Note: (1) Sample size n = 151

slide15

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

Image and reputation is a real strength within the US, especially in having a reputation for technical and leading edge programs which is of particular importance to US clubs

Image and Reputation CVM Performance(1)

Insights and Implications

  • Of most importance to the customer is that the programs are technical and leading edge and performance on this factor is very high at 8.9
  • People are also important and Les Mills is seen as having of reputation for fair, likeable and credible people

Recognised brand

Brings in and retains customers

Image and Reputation

Recognised as effective and safe

Fair, likeable and credible people

Technical and leading edge

Note: (1) Sample size n = 151

products and services generally perform very highly especially the actual programs themselves

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

Products and services generally perform very highly, especially the actual programs themselves

Product and Services CVM Performance(1)

Insights and Implications

  • Overall products and services rated highly at 8.3
  • Only a very small portion of US customers’ overall perceptions of value are shaped by their views in respect of products and services
  • In general Les Mills performs well on these factors within the US market
  • Although it is a longer term strategy, within USA Les Mills should look to move the focus away from price and cost to products and services through concentrating marketing and promotion efforts on the quality and effectiveness of the Les Mills system

Getting set up and going

Using the programs

Products and Services

Using the services

Account management

Billing

Note: (1) Sample size n = 151

slide17

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

Getting set up and going currently has no impact on perceived value but performance is high on all aspects

Getting Set Up and Going CVM Performance(1)

Insights and Implications

  • Performance is generally very strong with performance across all aspects at or above 8.0
  • Although of no current impact to the USA clubs overall, the high performance on these drivers indicates that Les Mills support of new clubs is working well

Providing me with training and education on programs

Providing me with programs that suit my needs

Agreeing a fair and reasonable contract

Getting set up and going

Assisting me with launching my programs

The initial training of my staff

Providing training and education to run Group Fitness

Note: (1) Sample size n = 151

performance across all subdrivers connected with using the programs is very strong

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

Performance across all subdrivers connected with using the programs is very strong

Using the programs CVM Performance(1)

Insights and Implications

  • Customers rated performance of the programs as very high at 8.6
  • Performance is strong across all subdrivers
  • Of particular note is that clubs rate the programs highly as generating a return on investment which is likely to support the better performance on prices and costs
  • Although still high, performance on providing programs and training to recruit and retain the best instructors is slightly lower

Ensuring ongoing quality of programs

Ensuring programs are innovative and exciting

Using the programs

Providing programs that generate a return on investment

Providing updated programs on a timely basis

Providing programs and training to recruit and retain the best instructors

Note: (1) Sample size n = 151

slide19

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

Using the services within the Les Mills system is important to US customers and although still relatively good, performance is lower than on other drivers

Using the Services CVM Performance(1)

Insights and Implications

  • In general Les Mills performance in respect of the services associated with the programs is perceived to be less than performance on the programs themselves
  • Most importance is placed on training the instructors, followed by assisting with measurement of the success of the programs and providing instructor certification
  • All other subdrivers currently have no impact
  • Although still high performance on these areas is relatively lower and improvement initiatives should be focused on training and assisting the measurement of the success of the program

Providing assistance with marketing any programs

Training my instructors

Using the services

Assisting me in keeping my staff happy and motivated

Assisting me with measuring the success of my programs

Providing certification of my instructors

Note: (1) Sample size n = 151

slide20

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

United States performs well on account management which suggests the “club coach” system is working well

Account Management CVM Performance(1)

Insights and Implications

  • All areas of account management are currently performing well and generally exceed other markets across most subdrivers
  • In particular, compared to other markets, the USA agencies perform well on proactive content
  • Performance on this driver and other drivers suggests that the “club coach” system is working well and should be considered for introduction to other markets

Committed to my business

Available when I need them

Provide me with information when I need

Account management

Assist me in sorting out issues related to my programs

Respect me as a valued customer

Proactively contacting me to add value to my business

Note: (1) Sample size n = 151

as in other markets billing is a strength with the usa agents on all aspects

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

As in other markets billing is a strength with the USA agents on all aspects

Billing CVM Performance(1)

Insights and Implications

  • The USA agents perform extremely well in all aspects of billing
  • Although unlikely to confer any significant competitive advantage it is an important hygiene factor where non performance could impact club retention

The bills I receive are accurate

The bills I receive are simple to understand

Billing

There is a convenient payment system

Ensuring confidentiality of financial arrangement

There are fair payment terms

Note: (1) Sample size n = 151

slide22

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

Prices and costs performs very well compared to all other countries, which is likely to be related to the high rates of the programs for generating a return on investment

Prices and Costs CVM Performance(1)

Insights and Implications

  • Prices and costs are currently rated at 7.4, significantly ahead of the global average
  • Perceived value is driven by both financial and non-financial
  • Although performing well compared to other countries, perceptions of financial costs are still well behind those for non-financial costs

Financial Costs

Prices and Costs

Non Financial Costs

Note: (1) Sample size n = 151

slide23

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

All aspects of financial costs have a large impact on overall perceived value with performance being relatively good, compared to other countries, across all factors

Financial Costs CVM Performance(1)

Insights and Implications

  • All aspects of financial costs impact on customers views of overall perceived value
  • Performance across all factors is relatively good compared to other markets
  • To improve performance within the US market on price and costs Les Mills should look to identify areas in operational costs that can be reduced without impacting EBIT
  • In addition a strategy of trying to move focus from price onto the qualities of the program through developing and promoting tools to measure the success of the program and use of marketing should also improve overall perceived value

Licence Fee

Financial Costs

Costs of setting up the program such as marketing and training

Costs to use the program eg music, video, headsets, uniforms, training etc

Note: (1) Sample size n = 151

slide24

USA

Process

xx% x.x

Key:

Impact Weight

2007 CVM Score

In general customers perceive performance of the US operation to be good in respect of non financial costs, although improving the convenience of workshops should be investigated

Overall Non Financial Costs CVM Performance(1)

Insights and Implications

  • Perceptions of performance in respect of non financial costs account for a large portion of overall perceived value
  • The US operations performance is perceived to be good across all factors except convenience of workshops
  • Given the relative impact of this driver it is worth investigating with customers what aspects of workshops (timing or location) can be improved and determining whether those issues can be improved without undermining program quality or profitability

Time and effort involved in setting up the program

Time and effort in operating the program

Non Financial Costs

Managing the resistance from staff eg instructors

Convenience of workshops

Note: (1) Sample size n = 151

slide26

USA

Surprisingly only 19% of customers perceived branded programs to be the main competition for Les Mills in the USA

Customers Views on the Main Competition for Les Mills programs(1)(2)

Note: (1) Sample size n = 145

slide27

RVS calculated as

Les Mills Score x 100

Competitors Score 1

USA

Process

x.x

Key:

2007 RVS Score

Where competition does exist in the US market, Les Mills programs outperform it on all aspects of customer value drivers leaving only 3% of the customer base at risk

Customers Views of Les Mills programs Main Competition(1)(2)

Likelihood to Reduce Usage of Les Mills programs in the Next 12 Months(3)(4)

Image and Reputation

3% of customer base at risk

Products and Services

Perceived Value of Competitors Products to Clubs

Proportion Expecting to Decrease Number of Les Mills programs Used in Next 12 Months

Prices and Costs

Overall Perceived Value

Notes: (1) Excludes responses that say there are “no competitors”; (2) Sample size n = 151; (3) Customers who rated 8 to 10 on a scale of 1 to 10 where 1 = ‘not likely” and 10 = “highly likely”; (4) Sample size n = 151

slide29

USA

As in other markets it is the programs contribution to attracting and retaining members, together with the image and quality of the programs which is most important to buyers, and performance is rated highly on all factors

Insights and Implications

  • Promotion to new clients should centre around how the programs generate a return on investment for the club and this needs to be reinforced once the club has purchased the programs so as to remove focus from price
  • This promotion will be best achieved through direct contact, using case studies and selling tools
  • Marketing of the programs to raise awareness of the programs should also focus on the programs themselves
  • The training and certification of instructors is important to clubs considering purchasing Les Mills programs which is different to the other markets but which is also an area of strength within the USA

Price ranks sixth with an 8% weighting